I often have to remember what Mark Boucher, Hedge Fund manager and contributor to tradingmarkets.com, has to say about short-term trading in his book "The Hedge Fund Edge": The discussion of short term trading appears as an appendix for a very good reason: I firmly believe that most of the people trading on a short-term basis should not be doing so. Short-term trading should (1) be reserved for only a very small portion of your overall portfolio; (2) only be used by very experienced investors who are already on top of global market trends; (3) only be used by people who have traded as a full-time business successfully for a number of years; (4) never be used by novice or beginning traders; and (5) be utilized by traders who understand that it may not consistently improve your risk/reward performance. I have nothing against short-term trading in and of itself. In fact, I made a living trading short-term patterns for several years. ... On the other hand, for many if not most traders and investors, short-term trading can become almost like a drug that eats up one's time, resources and investment capital. Anyone who has even the remotest inkling of trouble with gambling should stay away as far as possible from short-term trading. ... Furthermore trader should realize that short-term trading is a grind most of the time. Most strategies require the investor to stay glued to the screen. If you are on a bathroom break and your method signals a trade and you miss it - boom, that could be the best trade of the year. In addition most short-term strategies have a severe weakness - their risk/reward ratios are very poor compared with longer term strategies. The reason is simple. Short-term periods have less fluctuations to capture, so rewards are rarely 10 or 20 times the initial risk, as can often be the case on a good intermediate-term trade lasting months or even years.
Remember the trend is your friend. There is nothing stopping you from trading the trend on a intra day time scale. Just trade where you think there is a bit of momentum and you cant go wrong.
Hi Grizzly, You are wrong. As you recognize shorter time frames offer more potential for profit, why change your lifestile? Trade only once a week or so. Think about all the time this would allow you to excercise your "lazy liberty". nononsense
I do not accept that this is a fundamental principle, axiomatic to trading. And fortunately this website is not a community of morons. I understand that there are more movements in the smaller time frames. But the profits don't come from the movements but from being on the "right side" of these movements. So when you "see price movements that COULD HAVE BEEN exploited" you must be aware that these same price movements could have been exploited on the "wrong side" as well. So once again, why do you think that you are going to be more correct in trading the smaller moves than the longer ones? The "opportunity" of being wrong is present in all time frames and you can make a profit as quick as you can make a loss. That's why I am saying that the time frame you are trading (your holding period) is totally a matter of personal preference and the profitability is independent of time frame but depends only on skill and comparative advantage in whatever time frame you are trading. So you can enjoy your "lazy liberty" and forget about day trading
Hi neutrino, You start out by putting things rather well. The rest of your piece is rather inconsistent. In your own words, let me ask you: "So once again, why do you think that you are going to be more correct in trading the LONGER moves than the SMALLER ones? So you can enjoy your "lazy liberty" and forget about unjudicious trading Don't think that I want to defend a theory of any kind in this. I simply want to poke some fun at the pompous but silly stuff that is abundantly posted at ET's. Be good, nononsense
It appears there is empty argument here which is obscuring a valuable consideration for us. One may have skills for trading in shorter or longer time frames, of course. It is logical that the potential for profitability is proportional to the navigable length of the price line between times A and B. Turning your ship in shorter time frames will traverse more profit possibilities.:eek:
The human mind embraces simplicity .. the basis of evolution and civilization. So the sum of the major gyrations (ie DOW) is hugely hugely greater than any trend. Understand the zero sum dynamic; set out to make yourself rich and then make yourself rich. Day trading is the only time frame you need given this tack. (No offence to anyone who wants to jack around waiting days, weeks or months for a trend to vindicate their position) Summary: why complicate things?
Would it be possible that a Kelly ratio could be used suitably to measure quantitatively whether (intra)daytrading or multidaytrading (or else) would be more profitable/risky?
9 PAGES! And no one has MENTIONED SCALPING = HIGH COMMISSIONS!! The main thing for me is scalping consistantly eats away at your capital simply b/c of costs.. Hopping in and out of stocks, will churn you raccount, unless you can maintain a high win/loss ratio consistantly, which is hard to do. Swing trading makes commissions less of an issue...